## Operations Management Tests

What does WIP stand for?
Work in process
Hand tools, lubricants, and cleaning supplies are usually examples of what?
MRO Inventory
What inventory function exists between the manufacturing plant and the distribution plant?
transportation inventory
If a company carries 13 weeks of supply, what is the inventory turnover?
52 weeks / 13 weeks = 4
What is an assumption of the basic EOQ model?
Quantity discounts are not considered
What is an assumption of the basic EOQ model?
Demand is known and constant
If annual demand is 24,000 units, orders are placed every 0.5 months, and the cost to place an order is \$50, what is the annual ordering cost?
12 months / 0.5 months = 24 * \$50 = \$1,200
Suppose that a plant manager uses economic batch sizes for production of a product. Suppose further that the setup cost is \$50 per batch, the holding cost per unit per year is \$10, the annual demand is 30,000 units, the firm operates (and experiences demand) 300 days per year, and the production rate per day is 1,000 units. What will be the maximum inventory level that this product ever reaches?
P = 1,000 units
D = 30,000 / 300 = 100
S = \$50
Q = √(2DS/(H(1- D/P))) = 577
Imax = Q(1-(D/P)) = 577(1-(100/1000)) = 519
The definition of quality that involves the product functioning as expected without failure is
reliability
Quality has gained such prominence because organizations
have gained an understanding of the high cost of poor quality
Not only does TQM encompass the entire organization, but it
stresses quality is customer driven
(TQM and JIT focus on customers)
Studying business practices of companies considered “best in class” is called
benchmarking
Machine downtime due to failure in the process, scrap and rework are examples of
internal failure costs
Warranty claims, customer complaints, and costs of litigation are examples of
external failure costs
What quality control tool resembles a “fishbone”?
Cause and effect diagrams
For control charts, which of the following situations means that the process is NOT in control?
A measured observation is above the UCL
Suppose that a product has three parts, each of which must work in order for the product to function. The reliabilities of the parts are 0.898, 0.933 and 0.946 respectively. What is the reliability of the product?
Rs = (R1)(R2)(R3) = (0.898)(0.933)(0.946) = 0.793
Suppose that a product has two parts, both of which must be working in order for the product to function. The reliability of the first part is 0.85, and the reliability of the second part is 0.82. In addition, the second part comes with a backup that is 50% reliable. What is the overall reliability of the product?
0.82 + 0.5(1 – 0.82) = 0.91
(0.85)(0.91) = 0.7735
Common causes of variation are also known as
random causes
Variation in the production process leads to
quality defects
An x-bar chart is an example of what?
Statistical process control
Causes of variation that can be identified and eliminated are called what?
Assignable
All processes will have what type of variation?
Random/Common
What measures the central tendency of a set of data?
Mean
The center line of a control chart represents what?
Mean
Upper and lower control limits are usually set at +/- how many standard deviations from the mean?
3
Each day for two workweeks (10 days total), George weighs 4 bags from that day’s production. If the average of the means is 14 oz. and the average range is 0.4 oz., what is the lower control limit for an x-bar chart for this process?
LCL = x double bar – A2(R bar)
LCL = 14 – 0.73 (0.4) = 13.7084
**use table to find 0.73 and look at 4 NOT 10!
In the broad view of the organization everyone should have
the same view of serving the customer
Kaizen is a Japanese term referring to
continuous improvement
Three basic elements work together to complete a JIT system: just-in-time manufacturing, total equality management and
respect for people
What business function is responsible for sales, generating customer demand and understanding customer wants and needs?
Marketing
What business function is responsible for planning, coordinating, and controlling the resources needed to produce a company’s products and services?
Operations management
Operations management is responsible for increasing the organization’s efficiency, which means the company will be able to
eliminate activities that do not add value
Operations management is responsible for orchestrating all the resources needed to produce the final product. This includes all of the following except
a) obtaining customer feedback
b) arranging schedules
c) managing inventory
d) controlling quality
e) designing work methods
a) obtaining customer feedback
What are long-term decisions that set the direction for the entire organization called?
Strategic
Which of the following is NOT primarily performed by the operation management function?
a) job design and work measurement
c) location analysis
d) quality management
e) facility layout
What movement started with the publication of the results of the Hawthorne studies?
Human relations
(The Hawthorne studies measured productivity of workers with changing environments)
What is the process of monitoring the external environment called?
environmental scanning
Which of the following would NOT be considered a core competency that a company might have?
a) highly trained workforce
b) inefficient distribution system
c) skills in attracting and raising capital
d) use of information technology
e) quality control techniques
b) inefficient distribution system
(Core competencies are internal strengths of the company)
What describes the process of obtaining goods or services from an outside provider?
Outsourcing
Which is NOT considered one of the four broad categories of competitive priorities?
a) technology
b) cost
c) quality
d) flexibility
e) time
a) technology
When making competitive priority decisions, the firm
What are the three primary types of technology?
product technology, process technology, and information technology
The ease with which the product can be made is its
manufacturability
What do all product designs begin with?
An idea
What is reverse engineering?
Acquiring a competitor’s product and studying its design features
What technique is based on computing the quantity of goods a company needs to sell to just cover its costs?
Break-even analysis
What are costs that are proportional to the amount of units produced, like materials and labor called?
Variable costs
What is the break-even volume given a fixed cost of \$100,000, a variable cost per unit of \$30, and a selling price of \$35?
QBE = FC / (SP – VC) = 100,000 / (35 – 30) = 20,000 units
What are two categories of quantitative models?
Causal and time series
Which of the following is NOT considered to be one of the four basic patterns of time series data?
a) horizontal
b) trend
c) vertical
d) seasonal
e) cycle
c) vertical
Suppose that you are using the simple mean to make a forecast. This period’s forecast was equal to 100 units and was based on 6 periods of demand. This period’s actual demand was 86 units. What is your forecast for next period?
600 + 86 = 686 / 7 = 98
What value of the correlation implies that there is a perfect positive linear relationship between the two variable of a linear regression model?
1
Suppose that Sally’s company uses exponential smoothing to make forecasts. Further suppose that last period’s demand forecast was for 20,000 units and last period’s actual demand was 21,000 units. Sally’s company uses a smoothing constant equal to 40%. What should be the forecast for this period?
(0.4)(21,000) + (1 – 0.4)(20,000) = 20,400
In linear regression, what are we trying to forecast?
Dependent variable
What is a tracking signal used for?
To identify forecast bias
Typically a manufacturer will have more direct contact with what type of supplier?
Tier one supplier
Consider a packaged milk products supply chain. A lumber company provides wood to a paper mill, who supplies cardboard to a container manufacturer, who supplies containers to the milk products manufacturer. What is the lumber company?
A tier three supplier
What term refers to inaccurate or distorted information created in the supply chain?
Bullwhip effect
What is the time between order placement and the receipt of goods called?
What refers to owning or controlling sources of raw material and components?
Backward integration
What term refers to processes or activities that are completed by suppliers?
Outsource
The quantity that equates the cost of making a product to the cost of buying the product is generally called what?
The indifference point
In-sourcing incurs an annual fixed cost of \$500,000 and a variable cost of \$60 per unit. Outsourcing incurs an annual fixed cost of \$750,000 and a variable cost of \$20 per unit. What is the indifference point between the two alternatives?
500,000 + 60Q = 750,000 + 20Q
40Q = 250,000
Q = 6,250 units
Will’s omelet factory produces 2,500 omelets a day. They have determined that their daily fixed costs are \$4,000 with a variable cost of fifteen cents per omelet.
a) What is the total cost to make a day’s omelets?
b) What should Will charge for each omelet to make a 10% profit?
a) 4,000 + (2,500)(0.15) = \$4,375
b) (4,375)(0.1) = 438
438 + 4,375 = 4,813
4,813 / 2,500 = about \$2
Simuelson Industries can produce its own motors for a \$60,000 fixed monthly cost and a \$50 variable cost unit. Alternatively, Simuelson Industries can purchase the motors from an outside supplier for \$50,000 per month and \$58 per unit.
a) What is the indifference point?
b) What option should be chosen if monthly demand is 1,200 units?
a) 60,000 + 50Q = 50,000 + 58Q
10,000 = 8Q
Q = 1,250 units
b) 60,000 + (50)(1,200) = 120,000 to make
50,000 + (58)(1,200) = 119,600 to buy
120,000 > 119,600, so you should purchase the motors at 1,200 units!
What structures the sequencing of activities in a project?
Precedence relationships
The critical path is the sequential path of interrelated activities which has
the longest time
If a delay in an activity will delay completion of the whole project, the activity
is on the critical path
The sum of the activity times the critical path determines
the minimum time to complete the project
What time estimates are used when we can make a reliable estimate?
Deterministic
(probabilistic is uncertain)
The process of calculating ES and EF
requires only a forward pass through the network
Given this information about an activity: ES = 10, EF = 15, LS = 26 and LF = 31. What is the amount of slack associated with the activity?
16
Which of the following waiting line systems best describes a bank with a single waiting line that feeds customers to multiple identical servers?
multi-server, single-line, single-phase
Customers generally consider what priority rule to be the fairest?
first-come, first-served
What is the formula for the average utilization of the system?
lambda / mu
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